Decline in oil prices sends stocks higher
NEW YORK » Wall Street finished sharply higher yesterday as oil prices dropped sharply for the second straight day and investors were encouraged by the possibility of more help for the ailing financial system. The Dow Jones industrials gained more than 150 points, and all the major indexes were up more than 1 percent.
Crude prices tumbled, falling $5.33 to settle at $136.04 a barrel on the New York Mercantile Exchange, bringing oil's two-day drop to more than $9. The average U.S. retail price of a gallon of gasoline remains at a record $4.108, according to AAA auto club, the Oil Price Information Service and Wright Express.
Speeches by Federal Reserve Chairman Ben Bernanke, Treasury Secretary Henry Paulson and JPMorgan Chase & Co. Chief Executive Jamie Dimon gave the market some reassurance about the financial sector. Investors have been concerned this week about the health of government-backed lenders Fannie Mae and Freddie Mac; the two companies' troubles helped send prices lower on Monday, but they also helped lead the rebound yesterday.
The market was relieved to hear Bernanke say in a speech the central bank might extend its lending efforts to investment banks.
Paulson, meanwhile, made an upbeat assessment of the government's efforts to prevent the volume of mortgage foreclosures that touched off the credit crisis last year, although he also said he expects foreclosures to continue.
The Treasury secretary also said he was pleased at steps taken by Freddie Mac and Fannie Mae to raise money: "Fresh capital will strengthen their balance sheets and allow them to provide additional mortgage capital, as they balance their responsibilities to their mission and to their shareholders."
The Dow rose 152.25, or 1.36 percent, to 11,383.21, after moving in and out of positive territory.
Broader stock indicators rose as well. The Standard & Poor's 500 index rose 21.39, or 1.71 percent, to 1,273.70, while the Nasdaq composite index rose 51.10, or 2.28 percent, to 2,294.42.
Bond prices edged higher yesterday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.89 percent from 3.91 percent late Monday.
The dollar rose against other major currencies, while gold prices fell.
The Russell 2000 index of smaller companies rose 24.46, or 3.72 percent, to 682.72.
Advancing issues outnumbered decliners by a 2 to 1 basis on the New York Stock Exchange, where volume came to 1.73 billion shares.
Anemic economic conditions led Office Depot Inc. to forecast a nearly 10 percent drop in quarterly sales at the office supplies retailer's North American stores that have been open at least a year. Office Depot shares fell $3.29, or 31 percent, to $7.12.
Shares of Fannie Mae rose $1.62, or 10.3 percent, to $17.39; and Freddie Mac jumped $1.18, or 9.9 percent, to $13.09.